The fate of Livingston is set to be decided by the Scottish Football League after administrators began making staff redundant today.

The development came after the chairman, Angelo Massone, failed to meet a noon deadline to accept £25,000 for his controlling interest. The controversial Italian ignored the ultimatum from the interim manager Donald McGruther – from the administrator Mazars – who was appointed by the Court of Session on Friday after West Lothian Council took legal action to reclaim a £330,000 debt.

Massone claims his lawyer advised him not to accept the offer made to him by McGruther, who insisted he would wind up the "hopelessly insolvent" club unless the Italian relented.

McGruther started making staff redundant this afternoon but the playing squad and the majority of the key personnel will not lose their jobs until he meets the Scottish Football League tomorrow. It appears it will have the final say as to whether Livingston go under, but McGruther said any reprieve would involve the SFL breaking its own rules. He admitted Massone still had time to limit the damage but only if the Italian agreed to walk away.

"That's crucial and, without that – or an absolute revolution in the rules of the SFL – Livingston are out of business," McGruther told BBC Scotland. He said the noon deadline was necessary to allow interested parties enough time to convince the SFL they could save the club.

Livingston are also due to play Albion Rovers in the first round of the Co-operative Insurance Cup on Saturday.

McGruther said: "If we move forward with the interested parties, that game can easily take place and the future fixtures can take place under guarantees from interested parties. The problem is, again, no one will give those guarantees until Mr Massone is out of the picture."

Massone arrived at Almondvale shortly after today's deadline, facing a hostile reception from a number of fans. He remained defiant, claiming he had the funds to pay players and staff their wages for July.

He said: "I propose to pay immediately – to run the club and try to save the club – the player wages for July and the staff wages for July. The administrator didn't accept that."

Should Livingston fold, it is likely that Airdrie would be promoted to the First Division and Cowdenbeath to the Second Division after both lost in promotion/relegation play-off finals last term. There would not be enough time to add to the Third Division, leaving it with nine teams.